US Infrastructure: The Coming Boom-Kathleen Camilli

Last week, the American Society of Civil Engineers (ASCE) published an update to its Infrastructure Report Card. The report card, issued every four years, grades the current state of the national infrastructure on a scale of A through F. This time the prestigious society gave our country’s infrastructure a D+. The ASCE dates to 1852 and was founded by the engineers who built the NY State Croton Aqueduct, which continues to deliver water to NYC today. The ASCE represents 150,000 members in 177 countries and stands at the forefront of a profession that plans, designs, and operates society’s economic and social engine while protecting and restoring the natural environment. Since 1998, America’s infrastructure has earned persistent D averages from the ASCE. Hard to believe, but true–twenty years of persistently under-investing in our nation’s ability to move people, goods and services. Twenty years of persistently ignoring our own future, our own GDP, our own employment growth, our own resources. Is it any wonder that a populist president won the White House based on the slogan, “America First”?

The report covers 10 infrastructure sectors critical to the economic prosperity of the US, including airports, bridges, water systems, electricity, inland waterways, ports, commuter rail, roads, transit and wastewater. It shows a total investment funding need for 2017-2025 of $3.3 trillion, of which $1.8 trillion will be funded by federal, state and local sources, leaving $1.4 trillion unfunded. Left unfunded, and extrapolating via econometric model for population increases, the funding gap need increases by 2040 to $10.8 trillion, of which $5.2 trillion is unfunded. (The model used was INFORUM-LIFT, Long-term Interindustry Forecasting Tool- at the University of Maryland.) The report states, “Closing each infrastructure investment gap is possible, and the economic consequences caused by these gaps are avoidable with investment”. The key word here is: investment. Insufficient investment continues to be a significant drag on US economic productivity. For the last eight years US productivity growth has averaged only 0.5% per year, not keeping pace with our labor force and population growth, and translating into a declining standard of living.

A closer look at the report shows the largest investment gaps are in surface transportation (highways, bridges, commuter rail, transit), and water/wastewater. Thus, it’s no coincidence that the Trump 10-yr infrastructure plan is targeting $1 trillion for roads and water. For many years, the nation’s surface transportation system has been deteriorating. Yet, because this deterioration has been diffused throughout the nation and has occurred gradually over time, the true costs and economic impacts were not always immediately apparent. Federal highway spending in real terms is 23% LESS than it was in 2002. At the state and local level, capital investment is 30% LESS than it was in 2002. In public bus and rail transportation, 40% of all buses, and 25% of rail transit assets are in marginal or poor condition with all local spending going to maintenance of the aging fleet, not expansion of new vehicles. Continued deterioration leaves a significant and mounting burden on the U. S. economy. The AESC estimates America’s projected surface transportation deficiencies will cost the national economy cumulatively almost $1 trillion in GDP by 2025, and 1 million jobs.

Deteriorating conditions on surface transportation impose costs on American households and businesses in the form of damage to vehicles, imposition of additional miles traveled, time expended to avoid unusable or heavily congested roadways, higher costs associated to allot more time for trips to assure on-time arrival, as well as the environmental and safety costs of exposing more travelers to substandard travel conditions. Bottom line: Not investing in your future is very costly to society.

Later this year, President Trump will propose a detailed $1 trillion infrastructure plan to Congress for approval. My guess is that this plan is only the beginning of a multi-year plan to invest in America’s crumbling infrastructure. The ASCE grade needs to go from D+ to A. This will take trillions of dollars, and will need to be funded by tax revenues, tolls, loans, and private sector investment. Under President Trump, the funding is likely to be innovative, and not based on increased government indebtedness. The upside is that it will create millions of jobs, and stimulate GDP. Many of the individuals who will take those jobs are part of the declining labor force participation rate in the US. Some of them are males and females between the ages of 16-54, currently classified as “working part-time for economic reasons”, or “not in the labor force”. Some of them are the same people who voted for Donald Trump. So, I say to President Trump, “bring it on”. America First.